The Ephemeral Nature Of Companies

The Ephemeral Nature Of Companies

Companies begin with an idea. A prototype is made to help the brain develop a concept. Later, the prototype transitions into a beta. This model is then shared with potential customers to explain its use.

The creator tweaks the product based on the feedback they receive. Then, they go to investors. Investors provide the seed money that enables the creator to take their product to market. In this way, the creator becomes a founder.

Thus begins the building of a business. There are no employees as the business tries to gain a foothold. If the seed money runs out, the founder typically lives on credit. They are always on the verge of folding up the business and calling it done. But when marketing takes effect, sales pick up and they start turning a profit.

Sales start humming, and the founder is extremely happy, but this is followed by stress and overwhelm. So they decide to hire help. This creates a new set of problems, as the recruiting and onboarding process is messy. The first employees tend to be friends of friends, whoever is proximate and available.

Pirate Life

More people come aboard, believing in the company’s vision and helping to churn out more revenue. The company starts to take off, and the founder needs to hire more employees to adopt the structure of an organization.

It’s the Wild West; the founder and early managers are shooting from the hip. For a pirate, the focus is on raiding loot with little structure. Policies are handshake agreements and careful hiring practices.

Within years, the company reaches a size where the creator can’t be involved in everyone’s hiring process. Additionally, the hiring profile changes from early adopters to more risk-averse individuals. A structure must be put in place to protect the company.

While the product remains in demand and selling, operations stretch the organization to get every possible share of the market. The workforce has taken on the form of most organizations.

Becoming a Navy

The pirate ship has turned into a navy. No more playing loose to bring creations to life and just get it done. Now, the company has the offices that its early employees had been trying to escape.

The fear of losing what made the company great has become a reality. The founder and the start-up spirit are gone. With size come rules. With rules comes restricted freedom, and restricted freedom ends with stagnation.

The magic of the start-up has faded. Now, the product is starting to fade as well. Competitors have followed the company’s moves and are taking away its market share.

These same competitors have copied and improved on the product, so that the original is becoming out of date. Instead of focusing on the product, the company has focused too much on the organization.

The Harvest

The end of this magical run is far off but visible. The company is still making money, but growth has stalled and the decline has begun. The end of life is near.

The harvest strategy focuses on cutting all investments and cutting costs. The intent is to squeeze every sale without investing anything for the long run. It is the equivalent of receiving a prognosis of terminal cancer with three months to live and deciding not to plant apple trees because you’ll never be able to make apple pies from them as you always wanted.

However, the harvest strategy can last for years. It gives employees the false promise of stability. It also devotes so much effort, stress, and fight all for a losing cause. A harvest strategy is typically spotted by its symptoms: worn out, underappreciated, and miserable employees.

Why do we put so much effort into saving the walking dead? We can tell that the end of the product or company is inevitable. Are we keeping employees in a state of fiction, just so they will continue to fight for every last dollar?

Transparency

Would we sleep better at night if we created a transparent environment? One with straightforward conversations about the health of the company? Openness about the reality that the company may have only a few years or even months left? Is there an ethical side to not informing employees of the strategy, just so they will commit to a dying organization?

Maybe the better question is: Should we prolong the death of a company? The company still provides value, but it is a vanity driven by the desire to sustain a product that may no longer be of use. Take the short resurgence of HP’s Sprocket, which still replicated the polaroid picture 70 years after its introduction. The Sprocket was popular for a few months before fading into oblivion. It wasn’t necessary or needed, but it was unique and garnered sales before fading away. Would the world be better off if we focused our efforts on creating new value instead of scraping up the old?

References

Finding Your Companies Second Act

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